Greek government bonds plunge as default fears grow

JosieCox

Greek government bonds plunged Thursday, shaken by yet another downgrade and growing expectations that the country will be forced into a default.

By late morning, yields on the country’s two-year bonds had soared close to 4 percentage points on the day to more than 27% — their highest since being issued and a huge move even for notoriously volatile Greek debt. Yields rise when prices fall.

Meanwhile, yields on the country’s 10-year debt advanced by a little more than 1 percentage point to a shade under 13%— their highest in over two years. An inverted yield curve, where shorter-term debt yields more than longer-dated bonds, is a classic signal that investors see a very high risk of default.

“Overall the probability of a Greek exit [from the euro] remains higher now than it ever was,” Barclays economists wrote in a note.

Standard & Poor’s Ratings Services late Wednesday slashed its credit ratings on Greece’s debt to CCC+, saying it expects the country’s debt and financial commitments to be unsustainable without deep economic reform. “The outlook for full-year economic growth is highly uncertain,” S&P wrote, adding that it doesn’t expect the stalemate between Greece and its official lenders to be resolved before the middle of May.

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